EU countries adopt fiscal pact

All EU states, with the exception of the UK and the Czech Republic, agreed to adopt a fiscal compact for more budget discipline at the EU summit on Monday. But the agreement hardly improves on existing law, some commentators write, while others fear it will imperil the economic upswing.

Blog Charlemagne's Notebook - United Kingdom

Fiscal pact slows economy

The fiscal pact agreed in Brussels could even worsen the economic problems in these times of crisis, blogger Charlemagne fears on the website of the liberal-conservative weekly The Economist: "But did the leaders achieve anything useful to stem the crisis in the latest of their interminable summits? Their compact - now called the 'treaty on stability, coordination and governance in the Economic and Monetary Union', has as its main aim the imposition of balanced-budget rules on members. This may be a useful discipline in good times. But many worry that, at a time of widespread crisis, such pro-cyclical rules risk imposing too much austerity too widely, thus deepening the looming of recession and making it even harder to balance budgets. This may explain why leaders suddenly want to be seen talking about their plan for growth and jobs, particularly in tackling the problem of youth unemployment." (31/01/2012)

Europe still lacking a plan

The debt crisis and automatic sanctions for deficit sinners will hardly help resolve the European debt crisis, writes the liberal daily La Stampa: "The fiscal pact overlaps rather obscurely with economic and financial legislation already adopted by the EU after lengthy negotiations. ... The pact basically adds virtually nothing new to the existing rules apart from obliging the individual countries to enshrine budget discipline in their legislation and if possible in their constitutions. ... There is no reason to believe that Europe won't bring the crisis under control, but yesterday's summit still hasn't erased the haphazard impression European governments have so far conveyed. Hopefully this will change with the next summit." (31/01/2012)

No solution to euro crisis in sight

The EU summit on Monday in Brussels has fallen short of expectations, the left-liberal daily El País observes: "Seventeen summits have been convened since the outbreak of the financial crisis. All of them with the goal of ending the euro crisis. But the fact is that they haven't even solved the Greek problem. Yesterday the decision about cutting Greek debt was basically postponed yet again. This is not exactly a proof of competent handling of the situation. Nor has the problem of the huge cost of financing the debt of countries like Italy, Spain or even France been resolved. Economic recovery, or even effective budget balancing, will be impossible as long as the risk premium [for insuring against defaults on government bonds] remains above 300 basis points (as is the case in Spain and Italy)." (31/01/2012)

Czech No needs better arguments

In addition to the UK the Czech Republic has also said no to the EU's fiscal compact. Prime Minister Petr Nečas showed courage by stepping out of line, writes the conservative daily Lidové noviny, but he hid behind false arguments: "Nečas based his stance on the argument that the countries that signed the pact and that still don't have the euro can't be sure they will also be invited to all the euro summits. But that missed the point of the meeting in Brussels. It was about introducing central supervision of national budgets, and was only the first in a series of summits leading to a political union, as Merkel explained. ... Nečas has been gathering arguments against the fiscal pact for months. If he had supported the plan it would have been tantamount to a capitulation. ... Now he must have the courage to stick to his stance without hiding behind lame excuses." (31/01/2012)

Steer clear of the euro

Even if Poland goes along with the new fiscal pact, Prime Minister Donald Tusk should remain wary of the euro, writes the conservative daily Rzeczpospolita: "The euro club may be one of the most interesting economic experiments in the world. ... But as long as it is not based on solid financial foundations and unified principles it should be avoided. It is enough to make one fear that the prime minister will announce our accession to the euro when we see him demanding participation in talks about changes in the Eurozone. ... The problem is that the prime minister has said different things on the euro issue in the past. We should bear in mind that in 2008 he said that the euro should be introduced in 2011." (31/01/2012)